The smart choice for your business is to lease or finance your equipment for your Canadian business, as oppose to buying it outright.

Why Lease?

Affordable payments

Potential tax benefits

Preservation of lines of credit or retention of valuable cash

Upgrade your equipment “mid-lease”

With equipment leasing, the leasing company owns the equipment and you are paying them for the right to utilize that equipment for your business. In the majority of cases, you will have the option to buy that equipment at the end of the lease if you wish.

Why Finance?

You own the equipment, shown as an asset on your balance sheet.

Your payments are structured as principal and interest payments, paying down the total cost of the equipment.

Once you’ve paid all the equipment financing rates, you will own the equipment outright at the end of the financing term
With financing, you are utilizing your credit to apply for the amount you need to purchase the equipment. This way you are still able to use any unused capital to market and grow your business.

Understanding Financing and Leasing

Lease

Finance

How are my payments recognized / treated?

Lease payments act as “rental” payments through an operating lease or repayments with interest through a capital lease.

Your payments are treated as repayments with interest that reduce the principal amount of your initial loan.

Do I own the equipment?

The leasing company who gives you the loan owns the equipment during the lease and you pay the equivalent to rental payments; however, the majority of leasing offers provide the option to purchase the equipment at the end of the lease term.

During a loan, you assume all of the ownership responsibility of your equipment, just as if you had purchased it outright.

Do I need to make a down payment?

No down payment is usually required, however can be made to lower the monthly payment costs.

Loans usually require a down payment. You’ll then finance the remaining equipment cost.

How frequent are my payments?

We will structure your payments to match your cash flow with monthly, seasonal, semi-annual or annual payments. Or a more fitted custom payment structure.

You’ll most likely be paying monthly but we can work with you on structuring your payments to better match your cash flow.

Will I need to pledge any collateral?

A lease generally requires no collateral since the equipment leased serves as collateral.

Depending on your credit, you may need to pledge other assets as collateral before securing financing. We can work with you through this process.

How does my equipment depreciate and what are its tax implications?

* Please obtain your own tax advice

With an operating lease, you’ll make the equivalent of rental payments for your equipment and you can write off the full portion of your lease payments as an expense.
With a capital lease, you’ll assume liabilities of ownership for accounting purposes; however, you can likely deduct the full amount of your lease payments.

You’ll claim tax deductions for the interest paid on your loan and, since you own the equipment, you’ll amortize the equipment over its useful life. This means you’ll write off the annual amortization based on the equipment’s Capital Cost Allowance determined by Canada Revenue Agency.

Benefits to you

Whether you choose to lease or finance, the option to pay for your equipment over time is a smart move. You have lower up-front capital expenditure costs, and can term out the cost of the equipment, paying for it over time.

Thanks to benefits like these, eight out of ten businesses in North America use equipment leasing or financing companies to acquire the vehicles and equipment they need to grow. If you require more information about equipment financing rates or equipment leasing options,
contact us
today.